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When the Committee for Monetary Research and Education, a hard-money organization, met in New York a fortnight ago to discuss the investment outlook, nobody thought to mention gold except for the program moderator, who noted in passing at the end of the evening that the subject hadn't been raised.
One key difference is obvious between the credit standings of Washington and Buenos Aires. It's that Argentina, lacking new lenders to refinance its old debts, must deal with the bankers it has. It must wiggle its way out of the debts it can't pay by pushing them out into the future. Result: forced reschedulings.
When the bull market took a rest the other day, quotable observers were quick to blame the Fed. The apparent sense of the market's spokespeople was that bond prices had rallied last summer because the Fed was easy and that they had faltered last week because the Fed was tight.
News that Caterpillar Tractor Co., one of the Street's premier inflation plays, lost 31% more in the third quarter than it had in the year-ago period and that, as the Journal reported, "Further massive cuts are likely to be necessary if [the company] is to post a profit next year," raises some interesting questions...
The New York Post, fourth-largest daily newspaper in the United States and American flagship of Rupert Murdoch, the Australian publishing magnate, is a tabloid's tabloid. Its strongest editorial suit is sports, and its front page blares the kind of headline that makes a quick impression on bustling Manhattan commuters ("Subway Rider's Throat Slashed").
The bond market, presented for the past two weeks with the things that its self-appointed spokesmen had declared it wanted -- a slowdown in the economic expansion, more Federal Reserve credit and lower short-term interest rates -- has decided, perhaps, that what it would like is something else.
"New York -- DJ -- Treasury Secretary Donald Regan declined to say whether the Treasury would include a call provision in its next 20-year bond issue. . . . 'The idea behind the call is to put our money where our mouth is,' Regan said. 'We think that interest rates are coming down.'" •
As this publication packed up for the beach in the middle of August, the bond market was strong and the money market was weak. The Federal Reserve was relatively tight, and the rate of expansion of the economy had evidently begun to slow. The gold price was down, and there was some talk of deflation. A month later, the bond market is stationary (following Thursday's rally...
The brick wall of type on the next page describes the difference in yield between various strategic points in the Treasury maturity spectrum.... The news in the numbers is that, in the past few weeks (check the bottom of the page), the 30-year vs. 10-year spread and the 30-year vs. five-year spread have turned negative.
Grant's is bullish on bonds. The words don't come easily: As an editorial policy, we've avoided prophecy, and as a matter of record for the past 40 years, interest rates have gone up, not down. However, this is an epochal moment in finance, a time for choosing sides. Grant's will cast its lot with the bulls.
"For a major money center bank holding company, liquidity is primarily the ability of the Corporation and its subsidiaries to have continuous access to worldwide money markets in which to place deposits, debt and other liabilities." -- Manufacturers Hanover Corporation First Quarter Report.
Last fall, William M. McGarr, founder and president of The McGarr Fund, decided that things would be different in the stock market this time around.... Having made up his mind, he acted. He sold short the shares of capital-goods companies, farm equipment makers and commodity producers.
The operative reason for the stockmarket plunge of Financial Corp. of America, the huge, headline-prone savings and loan holding company in Los Angeles, will be revealed, as usual, too late. However, one factor -- perhaps the financial factor... has been the subtler decline in the slope of the yield curve.
On the morning of Thursday, May 31, the rain stopped in New York City. The tape carried news of a pause in business activity, and the House Subcommittee on Domestic Monetary policy, temporarily convened over on Maiden Lane, heard evidence concerning the allegedly wobbly financial condition of the government securities industry.
The Federal Reserve balance sheet for the week ended May 23 (the week between the Continental Illinois run and the dustup in Manufacturers Hanover common) raises some troubling questions about what the Fed knows, what it believes and what it can be expected to do in the future.
[E]xcerpts from the citation accompanying the Doctor of Laws degree, honoris causa, presented last month to Paul A. Volcker by Columbia University...
In the midst of the troubles of the Continental Illinois National Bank & Trust Company the other day, the Chicago Board of Trade Clearing Corp. moved to withdraw some $45 million that it had on deposit at that beleaguered institution. Then, on second thought, The Wall Street Journal reported, it decided to put the money, or some of it, back again.
Markets are full of divergences. There's a gap (a record, by some calculations) between stock and bond yields. There's a gap between the unprecedented United States trade deficit and the international value of the dollar, and there's a gap between the price of gold and the prices of gold mining shares.
When the phone rang last Thursday morning, it was Gilman C. Gunn III, the cosmopolitan bond man. Gunn, who has managed money in New York and Kuwait (he packed up after the terrorist explosion a few months ago), and who now works for Paribas Becker in London, had an idea for international investors...
All in the same week, the prime rate went up, money-market rates climbed and bond prices fell. The money supply rose, the volume of commercial paper increased and the Commerce Department divulged that the gross national product is, or may be, growing at the steamy annual rate of 7.2%.
The British base lending rate dropped last week, but that was the exception in the English-speaking world. On Tuesday, the Australian prime jumped to 13-1/2% from 12-1/2%, and on Thursday, there was talk of a boost in the Canadian prime rate, now 11%. In the United States, Monday through Thursday, interest rates of all kinds went into orbit.
Next year will be a banner year for cycle theorists and cycle watchers. Not only is the 54-year Kondratieff wave scheduled to hit its trough, and the 6-year gold cycle expected to approach its peak in 1985, but the less well-known 18-year devaluation cycle will also reach its critical stage during that year...
William F. Rickenbacker, the investment adviser, has a question. He points out that almost everybody believes that short-term interest rates should be lower than long-term rates... Why, then, he asks, were short rates usually higher than long rates in the days of the gold standard, when interest rates of all kinds were lower and steadier than they are today and when inflation was the exception rather than the rule? Why, indeed?
On the morning after the statement by the new chairman of Lilco, William J. Catacosinos, that the besieged utility might reduce or omit the common dividend and may or may not be able to turn on the juice at its Shoreham nuclear plant, the telephone in Eunice Reich's office didn't ring...
A Cook's tour of S&L financial statements Almost everybody has to do something for a living. Lately, my chosen calling has been the reading of initial public offering circulars of thrift institutions.
"In 1932 [wrote Sidney Homer] short-term interest rates also resumed their decline. In that year call money declined to 1% and commercial paper to 1-1/2%. Treasury bills at 0.08% entered the wonderland of nominal yields which from time to time has been the dream of both entrepreneurs and social reformers."
Two men with a hunch sat down at a computer the other day. Their hunch was that the Fed is creating more credit than it usually does at this time in the business cycle, and they asked the computer for the facts. The machine obliged with a table of year-over-year growth in the adjusted monetary base...